It creates a single file system that spans the internal storage and the SD card.

It locks the card to the phone with an automatically generated key.

The KB article also talks more about the unpublished SD card specifications relating to random memory access rather than simply relying on the Class Rating for SD cards

Determining whether an SD card is Windows Phone 7 compliant is not a simple matter of judging its speed class. Several other factors, such as the number of random read/write operations per second, play a role in determining how well an SD card performs with Windows Phone 7 devices

There will be more on the speed issues for SD cards to follow.

How to Reformat a locked or “bricked” microSD Card after use with Windows Phone7

Now we can thank RotoRooter in the XDA forum for discovering that using a newer Symbian Phone such as the Nokia E71 will bypass the secure password that WP7 applies to each microSD card. Once past the need for a password the Symbian OS simply allows you to format the card back to Fat32, just like that. We are still searching for a more generic way to get a WP7 MicroSD card reformatted after being used in a WP7 phone, but for now you need a friend with a newish Symbian phone. If you want to send me a locked MicroSD card for reformatting I would be happy to oblige.

The sequence on the Nokia E71 (I was lucky we had some of these left over from our last release of Company phones) was as follows:

Insert microSD Card into slot

Up pops a message looking for Memory Card Password

Press Cancel and the phone returns to the Tools Menu

Navigate to Memory, screen shows Memory Card Locked

Press Options to get Remove, Unlock and Format Options

Use Format to Reformat the Card, Unlock will just ask you for the password again.

After a few seconds the Fat 32 Format is complete and your card can be read as a Removable Storage Device on all other devices.

And here is the result in Windows 7, the Kingston 32GB MicroSD card now fully accessible again after trying to use the card in my HTC 7 Mozart.

Next I have been trying some speed test diagnostics on the Kingston 32GB Class 4 card that would not work on my WP7 phone.